Correlation Between Materials Portfolio and Sdit Short

Can any of the company-specific risk be diversified away by investing in both Materials Portfolio and Sdit Short at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Materials Portfolio and Sdit Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Materials Portfolio Fidelity and Sdit Short Duration, you can compare the effects of market volatilities on Materials Portfolio and Sdit Short and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Materials Portfolio with a short position of Sdit Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Sdit Short.

Diversification Opportunities for Materials Portfolio and Sdit Short

-0.54

Correlation Coefficient

Materials Portfolio  Sdit Short

Excellent diversification

The 3 months correlation between Materials and Sdit is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Sdit Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sdit Short Duration and Materials Portfolio is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Materials Portfolio Fidelity are associated (or correlated) with Sdit Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sdit Short Duration has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Sdit Short go up and down completely randomly.

Pair Corralation between Materials Portfolio and Sdit Short

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to generate 9.1 times more return on investment than Sdit Short. However, Materials Portfolio is 9.1 times more volatile than Sdit Short Duration. It trades about 0.17 of its potential returns per unit of risk. Sdit Short Duration is currently generating about 0.27 per unit of risk. If you would invest  8,289  in Materials Portfolio Fidelity on December 2, 2024 and sell it today you would earn a total of  474.00  from holding Materials Portfolio Fidelity or generate 5.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Materials Portfolio Fidelity  vs.  Sdit Short Duration

Materials Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Materials Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Sdit Short Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sdit Short Duration are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sdit Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Materials Portfolio and Sdit Short

The main advantage of trading using opposite Materials Portfolio and Sdit Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Portfolio position performs unexpectedly, Sdit Short can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sdit Short will offset losses from the drop in Sdit Short's long position.

The idea behind Materials Portfolio Fidelity and Sdit Short Duration pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.